He'll need huge luck to pull this off: George Osborne could learn the hard way that making budgetary rules can be dangerous, writes ALEX BRUMMER

Forget the eye-catching fizzy drinks tax and more funding for school sports.

The real narrative of George Osborne's fourth financial statement in a year is that he was hopelessly optimistic about the economy and the public finances last November – and is now engaged in a large-scale retreat from the sunlit uplands he described in his Autumn Statement.

On that occasion, Osborne found an extra £27billion to spend by 2020-21, thanks to some heroically optimistic economic forecasts.

Now, the latest numbers from the 'independent' Office for Budget Responsibility show that instead of that handsome amount in credit, the Government will be borrowing an extra £56.3billion over the very same period.

George Osborne (pictured) is now engaged in a large-scale retreat from the sunlit uplands he described in his Autumn Statement, writes ALEX BRUMMER

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Osborne is learning the hard way (as Gordon Brown did before him) that setting yourself budgetary rules can be dangerous – because you look jolly silly when you start to break them left, right and centre.

He has failed to meet the cap he imposed on welfare spending in his last budget. He also has breached his pledge that debt, the Government's accumulated borrowing over many years, would fall as a percentage of the nation's total wealth this year. That will not now happen until 2016-17.

And in terms of the actual debt Britain is saddled with – that will still be rising in 2020-21, when it will reach a whopping £1,740billion – compared to £1,591billion in the year to April 2016.

So how did the Chancellor and his economic advisers get it so wrong? How did they miss the storm clouds that already had gathered over the world economy when he gave his rose-tinted November statement?

After all, he was very much present at the International Monetary Fund meetings in Peru last October, when the catalogue of problems facing the global markets was spelled out in alarming detail. Growth in China's vast economy, the second-largest in the world, was slowing fast.

As a result, commodity prices including oil were in freefall, delivering an enormous blow to the many nations dependent on natural resources.

The eurozone was saddled with stagnation, the threat of deflation and a broken and unrepaired banking system laden with bad debts. Financial markets around the world were tanking, and the Bank of England was starting to back down in its forecast that it could start to raise interest rates in 2016.

Osborne (pictured) is learning the hard way (as Gordon Brown did before him) that setting yourself budgetary rules can be dangerous, writes BRUMMER

In spite of the overwhelming evidence of a deeply disturbing global backdrop, the Autumn Statement blithely forecast that the UK would grow regardless, with output expanding at 2.4 per cent or more, right up until 2018, before slipping back a little.

Today, the truth is that although the British economy is still performing remarkably well – when compared to our ailing European partners – as one of the most open market economies in the world we can never escape the cold blast from overseas. The closure, for instance, of British steel plants in Redcar, Scunthorpe and elsewhere, is a direct consequence of cheap Chinese steel imports flooding the market.

At least the latest attempt by the Office of Budget Responsibility to foretell the future seems to have recognised the new reality. It records that the downturn in world growth and trade has knock-on implications for British exports. It adds that the risks are significant, with slower growth in China, dramatic falls in the price of oil, and the prospect of the US raising interest rates – probably in June – all adding to the uncertainty.

On top of this, it now admits that when, in November, it forecast higher productivity growth – in other words, greater output for each employee working in Britain – it was wrong. It bluntly admits it was a 'false dawn' and as a result it is having to rethink its upbeat projections for Britain. The growth rate this year has thus tumbled to 2 per cent, from 2.4 per cent in 2015 and a healthy 2.9 per cent in 2014.

One of the more remarkable setbacks for the Chancellor is the way that Britain's normally buoyant tax income from the North Sea has vanished. A small footnote in the Budget 'Red Book', which contains all the Treasury's calculations, shows that receipts from oil and gas taxation which were forecast to be £10billion in 2014-15 actually came in at just £2.2billion that year.

They were zero in 2015, and next year the Government will actually be subsidising the industry by £1.1billion! This is in large part due to a calamitous fall in the price of oil, and thus in the profits of oil companies, on which corporation tax is paid.

Osborne (pictured, walking away from Downing Street) has failed to meet the cap he imposed on welfare spending in his last budget

As Osborne pointedly noted in his Budget speech, had the United Kingdom not held together at the time of the Scottish referendum, an independent Scotland would be bankrupt. Together, disappointing North Sea revenues and the lower prospects for economic expansion mean that the Government will suffer a tax shortfall of £52.4billion over the next five years.

How, then, has Osborne managed to produce a Budget that at first glance looks full of giveaways? One of the key devices he has deployed is a massive switch of taxation burden from small business, a vital constituency for the Tories, to big firms.

Over the next five years, reductions to the tax relief given to major corporations on the interest on their debt will yield £9billion in extra revenues, of which £7.4billion will be handed back to small and medium firms – the enterprise and growth engine of the economy.

Osborne is putting further pressure on the public sector to live within its means by removing the pensions tax break that big employers, such as the NHS and police, receive on national insurance payments for staff.

And it shouldn't be forgotten that the Treasury is benefiting from the fact that the interest rates the Government has to pay on its own debt will be far lower than the Chancellor was expecting over the next five years. This will hand him a projected £21.8billion of savings.

As is the case with most Budgets, the most important information is not what the Chancellor chooses to share with the Commons and the public in his speech, but the complex accounting behind the record 77 changes listed in the Red Book.

This shows that despite all the hard work he has put in over six years seeking to impose fiscal discipline on a bloated public sector, the Chancellor's goal of producing a surplus in the British economy will still require further unspecified cuts. That and a huge dose of good luck, that in the teeth of a global downturn we do not fall back into recession.

Nearly a decade after the financial crisis struck, Britain still has a very long way to go until the legacy of the Blair-Brown years is finally eradicated.

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George Osborne could learn the hard way that making budgetary rules can be dangerous